PUD VS Condominium: Serious Differences Exist

Mortgage and Lending with NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 IL Lic 031.0006220/WI


PUD VS Condominium: Serious Differences Exist



PUD and Condo (Condominium) ...


I'm sure you've heard or read these terms when talking or reading of something real estate-related.  They're kind of odd sounding.  Hard to forget.


But beyond their rather funny names, what are they? What are their characteristics?  And when you buy/own one, what determines legal ownership?


First:  Condo (short for Condominium), is probably the most commonly heard of the two terms.  A Condo property (typically referred to as a "Unit") lies within a legally platted Condominium site having a legally formed "Condominium Association".  


A Condo property is established and recorded as such.  The recorded documents also establish "Declarations and By-Laws" and rules (known as covenants).  The rules outline, detail, and mandate how the Condominium Association runs.


In short, a Condominium is actually a designated legal method of home ownership ...


Condominiums share some similarities with PUDs.  And for that reason, anyone considering the purchase of a Condo should make sure to check what legal form of ownership and property they're considering.


To accomplish that, a potential borrower must check the Condo Declarations and Legal Description for the subject property.  Simply viewing the property does not reveal legal ownership.


Above I referred to Condominium Associations and the fact that they have "covenants".  It's wise for all prospective Buyers to educate themselves fully regarding the details of the Covenants/Rules for their potential new home prior to entering into a Contract to buy. (At this time, it's also crucial that potential Buyers obtain information regarding the financial "health" of their future Association.)


When a Buyer purchases a Condo Unit, they purchase the individual right to only their Unit.  The Homeowners Association "owns" the land on which the Units sit.   A new Unit Owner becomes an "equal owner" of the commonly owned facilities within the Condo project (should there be any) with other Condo Unit Owners.


Facilities and services found within their Condo Association can include Common areas.  Common Areas are defined as those areas of multi-owner real property meant for the exclusive use of all individual owners.  


These areas are maintained by the HOA with the Homeowners Fees/Dues paid by each Unit Owner.  These fees are typically paid monthly to the Homeowners Association or their professional management company, but other payment arrangements can exist.


  • Examples of Common Areas are:  Hallways, Laundry Rooms, Storage Areas, Balconies, Patios, Mechanical Rooms, Parking Lots, Driveway Access, etc.
  • Common Area Recreational Facilities can include:  Green Areas, Playgrounds, Water Retention Areas, Pools, Tennis Courts, Exercise Facilities, Security Gates, Party, Clubhouse, or Recreation Rooms, etc.
  • Typical HOA Services can include:   Snow removal, landscaping, exterior maintenance of units and Common Areas, and more.


Homeowners Associations often have established rules that must be followed by property owners.  These rules come in the form of Covenants,  Conditions, & Restrictions ... known as CC&R. 


Things commonly covered by the CC&R are:

  • Noise Level Restrictions
  • Smoking Restrictions
  • Pet Ownership
  • Use of Clubhouse, Pool, Tennis Courts, etc.
  • Parking Restrictions
  • More ...


Again, it's wise for potential buyers to educate themselves thoroughly regarding HOA rules prior to signing a contract for purchase.  Why?  Some HOA rules and regulations can prove to be a poor fit and not fulfill the needs of some Buyers.  Better to be aware and know this info upfront.


Second:  The funny sounding name PUD?  It stands for Planned Unit Development.   


The biggest difference between the two types of properties ... PUD and Condominium ... is a legal one.  PUDs are a different legal classification of ownership from Condos.


Let me say that again ... 


The Buyer's legal ownership held in the two types of properties is different.  PUDS feature ownership of an individually-owned parcel or site.  In other words, the unit owner owns the land on which the unit lies (and possibly even some land that surrounds it).  That is in stark contrast to Condominium ownership. 


PUDs can be made up of attached or detached units.  Planned Unit Developments can exist of condominiums, townhomes, single-family homes and even retail and commercial space may sometimes be found within these developments.


Like a Condo, a PUD is governed by a Homeowner Association (HOA) that mandates HOA Fees be paid by individual unit owners.  These HOA Fees cover the upkeep, maintenance, and repair of common areas and facilities.  


Because of the differences between these two properties legal ownership, I can't stress strongly enough once again how important it is that legal ownership of a property be firmly defined and established prior to a Buyer entering a purchase contract.  (If the Buyer is obtaining a mortgage to purchase the property, this will be of vital importance to the Lender also.)


The legal ownership of the property cannot be determined by appearance or physical aesthetics of the property alone.  Other documentation or descriptions can contain clues as to legal ownership, but the only foolproof way to determine if a property is a PUD (or not) is via a review of the Covenants & Restrictions for the development.  


Although the names Condo, Condominium, or PUD may sound funny ... there's nothing funny about a Buyer contracting to purchase one legal form of property when they believe they are buying another.  It's why I stress the importance of potential Buyers not overlooking this first vitally important step.


Address all legal ownership questions prior to signing a real estate contract.


There are thousands of Condo and PUD units across Chicago and the Chicagoland suburbs, so it's critical that our area Buyers ... and the professionals representing them ... know and understand the pros and cons, unique qualities, and distinct characteristics of both these forms of legal ownership. 


Education is the best form of insurance you can provide yourself when it comes to transacting real estate and mortgage financing ...



* When in need of Mortgage info or service when buying, refinancing, or investing in a home in New Lenox - elsewhere in Chicagoland - IL & WI, contact me


I'll be happy to put my 40+ years of mortgage experience and expertise hard to work on your behalf.

I'm easily found at:


Gene Mundt

Mortgage Originator - NMLS #216987 - IL Lic. #031.0006220 - WI Licensed

American Portfolio Mortgage Corp.
NMLS #175656
Direct: 815.524.2280
Cell/Text: 708.921.6331
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Gene Mundt

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Michelle Chase

Yes, PUD verses condo affects lending. Florida has a lot of townhomes that are legally described as condo.. Many condo descriptions only accept conventional or cash. They have to be an approved community for FHA financing. Great Post!

Apr 26, 2019 06:06 PM #3
Michael Rasch
Florida Home Sales and Investments - Hallandale Beach, FL
Michael Rasch 305-741-1819

In reading your write-up one must be clear is stating which is the reference state.


In Florida, the law has rules for HOA ( home owners associations) and COA ( Condo Association ). as for PUD's well have not seen that lable here yet, and when you start talking about shares, that's a Co-op you bought into owning a company that owns the building ( and sometimes the land )

Condo have a non-profit that runs the common area but condo owners have a piece of that common area as ownership. 




Apr 26, 2019 07:32 PM #4
Carolyn Roland-Historic Homes For Sale In Delaware and S. Chester County PA
Patterson-Schwartz Real Estate - Wilmington, DE
Carolyn Roland, GRI, CRS

I had to look at what state you are from, because it gave me a frame of reference for your area. Each locality has its own forms of ownership, i.e. I have never seen a co-op in my area, but people from NY are very familiar with them back home.

Apr 26, 2019 08:30 PM #5
Sharon Parisi
United Real Estate Dallas - Dallas, TX
Dallas Homes

This is a thorough explanation of both types of properties.  Thank you for your detail.  HOA docs are often overwhelming to buyers.  Many speed read the docs and miss important details. 

Apr 26, 2019 09:20 PM #6
Kimo Jarrett
WikiWiki Realty - Huntington Beach, CA
Pro Lifestyle Solutions

Very informative and useful information, however you didn't mention townhomes, so, I'm curious to know why not? 

Apr 26, 2019 09:39 PM #7
Grant Schneider
Performance Development Strategies - Armonk, NY
Your Coach Helping You Create Successful Outcomes

Good morning Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi - this is the first I heard of a PUD.  I am wondering now what my townhouse was 30 years ago.  I thought I owned the land.

Apr 27, 2019 04:04 AM #9
Gina Lollo
Northshore Properties Realty - East Setauket, NY
"Love where you live"

Good job!!!

Apr 27, 2019 04:26 AM #10
Muhammad Mushtaq
Weichert, Realtors® - SBA Group - Fall River, MA

Great article on condominium and PUD and especially in those areas where there are not many PUD projects, it is good to have clear understanding of both types.

Apr 27, 2019 05:16 AM #11
Seesan Ed
BHHS Fox & Roach Realtors - Bear, DE
The Most Helpful REALTOR in Delaware

Great, valuable info for a real estate agent who should be the guide for their clients. For an ordinary buyer, this info is like a jemstone in a jewelary.

Apr 27, 2019 05:50 AM #12
Nina Hollander
Coldwell Banker Residential Brokerage - Charlotte, NC
Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor

Good morning, Gene... a great explanation. I find myself discussing these differences more often than one might think. 

Apr 27, 2019 06:34 AM #13
Scott Godzyk
Godzyk Real Estate Services - Manchester, NH
One of Manchester NH's Leading Agents

I love how you go into great detail. We are getting a great deal of relocation to NH for employment. Many seek out condos as affordable and do not understand what it means, what it entails or what to do next. I love having this talk with them which sure can help before they dive into buying

Apr 27, 2019 06:34 AM #14
Dana Basiliere
Rossi & Riina Real Estate - Williston, VT
Making deals "Happen"


We just went through this whole "condo vs PUD" thing with a townhouse development I have listed.   Fannie and Freddie require that a condo building be 75% complete before underwriting,  That is tough on a triplex because it means 100%. Long story short the developer was able to convince the town's DRB to grant footprint PUD status which solved that problem. 

Apr 27, 2019 07:10 AM #15
M.C. Dwyer
Century 21 Showcase REALTORs - Felton, CA
Santa Cruz Mountains Property Specialist

Thanks for writing one of the best descriptions of the differences between condos and PUDs that I've ever come across!

Apr 27, 2019 10:16 AM #16
Debb Janes EcoBroker and Bernie Stea JD
ViewHomes of Clark County - Nature As Neighbors - Camas, WA
REALTORS® in Clark County, WA

Such an important distinction. You did a great job explaining something that can be difficult to convey to the average buyer, and seller. 

Apr 28, 2019 08:17 AM #17
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Gene you provided great info.  Also it is very important if a unit is a condo or PUD for FHA purposes.  PUD's do not have to be on an approved FHA list.

Apr 28, 2019 12:54 PM #18
Patricia Feager, MBA, CRS, GRI,MRP
Selling Homes Changing Lives

Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi -I am always glad when your posts get featured because I know it will be something good, educational, informative and industry related!

You have a gift for explaining things easily which is greatly appreciated. 

Apr 28, 2019 05:01 PM #19
Lynn FISCHER Phoenix, AZ West Valley, Sun City, Active Adult, Sun City Grand
HomeSmart - Sun City, AZ

Thank you for the post.  Great Information!  "PUD vs Condo' has been an issue we've have to deal with here in Phoenix, AZ for quite a number of years. 

In particular, the attached units in the original Sun City, Arizona have property descripions, as well as names of their HOA Associations, that contain the word "Condo" or "Condominium Association" as part of their association name, when in fact they are PUDs for lending purposes.  

Apr 28, 2019 06:50 PM #20
Paul S. Henderson, REALTOR®, CRS
RE/MAX Northwest. - Tacoma, WA
Tacoma Washington Agent/Broker & Market Authority!

I actually learn a lot from this post Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi . Thank you for sharing!

Apr 30, 2019 09:51 AM #21
Roy Kelley
Realty Group Referrals - Gaithersburg, MD

Congratulations on your feature recognition.

This is important information to share with prospective home buyers.

May 01, 2019 08:14 AM #22
Marney Kirk
Cummings & Co. Realtors - Towson, MD
Towson, Maryland Real Estate

Gene, these are very important distinctions. Terrific information in this post!

May 01, 2019 01:55 PM #23
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